Income Tax Severed Letters - 2022-12-14

Technical Interpretation - External

27 October 2022 External T.I. 2021-0892441E5 - CEWS Asset Acquisition Rules

Unedited CRA Tags
125.7

Principal Issues: Whether a particular entity can be considered the “seller” contemplated in subsection 125.7(4.1) and (4.2) of the Act when it did not sell its assets directly to the relevant eligible entity?

Position: No.

Reasons: Subsection 125.7(4.1) requires that the eligible entity acquire assets directly from the seller.

11 October 2022 External T.I. 2020-0856421E5 - Adjusted AII and Deemed ABI

Unedited CRA Tags
125(5.1) (b), 125(7), 129(4), 129(6)
Summary Under
Tax Topics - Income Tax Act - Section 125 - Subsection 125(7) - Adjusted Aggregate Investment Income - Paragraph (c)
rental income deemed not to be property income by s. 129(6) is not included in the recipient’s AAII
Summary Under
Tax Topics - Income Tax Act - Section 129 - Subsection 129(6) - Paragraph 129(6)(a) - Subparagraph 129(6)(a)(i)
rents excluded from property income by s. 129(6)(a)(i) were also excluded from the recipient's AAII

Principal Issues: Whether rental income that is deemed ABI by virtue of subsection 129(6) of the Income Tax Act (the “Act”) will be included in the computation of a taxpayer's Adjusted Aggregate Investment Income as defined in subsection 125(7) of the Act.

Position: No.

Reasons: The legislation.

27 September 2022 External T.I. 2021-0903731E5 - Qualified Farm or Fishing Property

Unedited CRA Tags
110.6(1.3), 110.6(2)

Principal Issues: Whether a capital gains deduction under subsections 110.6(2) and (2.2) of the Income Tax Act would be available in the following situation described.

Position: Question of fact. In the situation described, likely yes.

Reasons: See below.

26 September 2022 External T.I. 2021-0895761E5 - Taxation of stipends

Unedited CRA Tags
5(1); 9(1); 56(2); 56(4); 125(7)

Principal Issues: Whether stipends earned through a physician's corporation are taxable under section 5 of the Act.

Position: No.

Reasons: Consistent with prior published positions.

23 August 2022 External T.I. 2021-0906701E5 - Mandatory COVID-19 tests - whether prescribed

Unedited CRA Tags
118.2(2)(o); 118.4(2)

Principal Issues: Whether COVID-19 tests for travellers entering Canada satisfy the condition in paragraph 118.2(2)(o) of being prescribed by a medical practitioner, when the tests are mandated by an Order in Council (OIC) that is made pursuant to the Quarantine Act.

Position: No.

Reasons: An OIC that is made under the Quarantine Act is a legal instrument that is fundamentally different from an order or prescription that a medical practitioner normally uses in their clinical practice. Namely, the “prescribed” requirement in paragraph 118.2(2)(o) does not connote a legal obligation on individuals to undergo a diagnostic procedure or service, as it is the case with the OIC in question. Also, the OIC is technically made by the Governor General who, in our view, would not be providing medical services as a medical practitioner as defined in subsection 118.4(2).

Technical Interpretation - Internal

25 November 2022 Internal T.I. 2022-0940071I7 - Employment income earned on surrendered reserve land

Unedited CRA Tags
81(1)(a)

Principal Issues: Is the employment income earned on reserve land surrendered by a First Nation to provide employment exempt from tax under the Indian Act.

Reasons: Based on jurisprudence, the courts have given significant weight to employment duties performed by members of a First Nation on land that was once reserve land but was surrendered by the First Nation in exchange for the promise of employment of its members.

22 August 2022 Internal T.I. 2019-0810061I7 - XXXXXXXXXX v MNR -220(3) and 152(7)

Unedited CRA Tags
220(3), 152(4) and (7)
Summary Under
Tax Topics - Income Tax Act - Section 220 - Subsection 220(3)
s. 220(3) could not be used to extend the normal reassessment period running from an arbitrary assessment
Summary Under
Tax Topics - Income Tax Act - Section 152 - Subsection 152(4) - Paragraph 152(4)(a) - Subparagraph 152(4)(a)(i)
misrepresentation (a repeated failure to file returns) could not ground CRA reassessments, beyond the normal reassessment period, to reduce arbitrary assessments made by it
Summary Under
Tax Topics - Income Tax Act - Section 164 - Subsection 164(1.5)
s. 164(1.5) is a complete code for when the s. 164(1) period can be extended, so that s. 220(3) cannot be so used
Summary Under
Tax Topics - Income Tax Act - Section 152 - Subsection 152(6)
s. 152(6) is limited by s. 152(4)(b)

Principal Issues: Whether subsection 220(3) or subparagraph 152(4)(a)(i) can be used by a taxpayer to obtain a reassessment of taxation years that whose normal reassessment period has ended.

Position: No.

Reasons: Subsection 220(3) extends the deadline to file a return, but not its normal reassessment period. To allow a taxpayer to receive a reassessment beyond the normal reassessment period under subparagraph 152(4)(a)(i) simply because they neglected to file a notice of objection within the period specified under the Act would be against the scheme of the Act and inappropriate, as it provides a non-compliant taxpayer with access to a reassessment when a compliant taxpayer would not receive the same treatment.